Kansas is a cautionary tale for Arizona: pigs do fly!

Something truly remarkable happened last week: the state legislature of Brownbackistan fna Kansas passed an income tax increase to begin repairing the fiscal damage to the state caused by Governor Sam Brownback and Tea-Publicans’ religious experiment in creating a faith based supply-side “trickle down” utopia in America’s heartland. Pigs do fly!

After the Kansas Legislature on Friday approved legislation that would reverse his signature tax cuts, he can veto the bill or let it become law without his signature. He has already said he wouldn’t sign it.

“As with all legislation, Governor Brownback will review the bill closely once he receives it,” the governor’s spokeswoman, Melika Willoughby, said in an email.

The Kansas Senate passed the bill 22-18 Friday morning. Because no amendments were made to the legislation first passed by the House, it heads to the governor’s desk.

The bill is projected to raise more than $1 billion over two years by raising income taxes and ending a tax exemption for roughly 330,000 business owners.

Sen. Barbara Bollier, a Mission Hills Republican who voted for the bill, said the governor could get a popularity boost if he lets the legislation take effect.

“I’m not sure his ratings can go any lower,” Bollier said. “That clearly isn’t going to impact his decision, I don’t think. I would say if he does (let the bill become law), his ratings will go up, and if he had the guts to sign the thing, then they really would.”

Other Republicans said Friday they didn’t see Brownback doing that.

“I would be really surprised if the governor allows this to become law,” said Sen. Jacob LaTurner, a Pittsburg Republican who voted against the bill. “Clearly it’s a long way from what he proposed.”

The state faces roughly $750 million in budget shortfalls over the next two years. A different shortfall of around $320 million this year cannot be mended by the tax increases.

The bill is one of the largest Kansas tax increases in recent memory, coming on the heels of another sizable tax increase in 2015 when lawmakers raised the sales tax and boosted the state’s take on a pack of cigarettes.

The new tax plan would bring in more money by adding a third income tax rate of 5.45 percent for single filers who make more than $50,000 and married joint filers who make more than $100,000.

It also boosts a second income tax rate to 5.25 percent. That rate would be paid by those who file individually and make more than $15,000, but not more than $50,000, and couples filing jointly who make more than $30,000, but not more than $100,000.

A lower tax rate of 2.7 percent, the only rate staying the same, will be for individual Kansans making less than $15,000 and joint filers who take in under $30,000.

Conservative Republicans came out strongly against the bill on the Senate floor.

* * *

Sen. David Haley was one of the last senators to cast his vote in favor of the bill. But the Kansas City, Kan., Democrat did so with some hesitation.

“I don’t know that I’ve ever had a more intense vote in 23 years of being here,” he said.

He and other Democrats said the bill fails to completely mend the problems they see in Kansas.

But lawmakers see it as a start.

The debate Friday morning quickly became an airing of grievances over the issues that have marked the Brownback era.

Conservatives remained supportive of the governor’s policies, decried the increase in taxes on Kansans and said the state has a spending problem, not a revenue problem.

Democrats kept coming back to this point: They believe Brownback’s tax cuts and leadership brought them to a day like this, where tax increases were a path forward.

Senate Vice President Jeff Longbine, an Emporia Republican, said he had some heartburn about the bill. But he’s learned in the Senate that you rarely get everything you want.

“To those that only want what they want, it’s going to be a difficult session,” Longbine said before voting for the bill.

The bill gives lawmakers a path to avoid cuts to education, he said.

“This might be our best shot,” Longbine said.

Brownback has stuck by his 2012 tax cuts, which slashed income tax rates and gave the business tax exemption.

Budget shortfalls, cuts and tax increases of a different kind have followed since that move was made.

A year ago, a bill that would have ended the Brownback tax cut for thousands of business owners couldn’t even make it out of the Kansas House.

But closing the tax exemption known as the LLC loophole became a major issue of the 2016 campaign, where new moderate candidates won spots held by more conservative incumbents.

* * *

Sen. Dinah Sykes, a moderate Republican from Lenexa who was elected last fall, said the bill is a start and gets Kansas on the path that it needs to be on.

“I’m not saying that a vote for taxes is a good vote,” Sykes said. “No one likes paying taxes. But we want to see our schools funded, we want to see our roads kept in good condition, we want to know that when we dial 911, that a firefighter or a police officer are going to show up.”

* * *

Earlier in the week, Brownback asked a small crowd of business owners to go to their senators and oppose the bill.

It appears that effort on the governor’s part was unsuccessful.

The bill passed by the Senate Friday had strong bipartisan support in the House, where it was approved on a final vote of 76 to 48.

Governor Brownback can face reality and admit that his religious experiment in creating a faith based supply-side “trickle down” utopia in Kansas has been a complete disaster and allow this bill to become law without his signature, or he can be a dogmatic ideologue and veto the bill (his veto would be sustained), which will leave Kansas in a fiscal disaster without a way out because of Tea-Publican ideological extremists.

We’ll find out if pigs do fly, or are slaughtered by Tea-Publican ideologues on the altar of religious extremism.

A note of caution: the Arizona legislature could not pass a tax increase by a simple majority vote because of the GOP’s “weapon of mass destrution,” Prop. 108 (1992), the “Two-Thirds for Taxes” amendment.

When have Republicans NOT thought that a tax cut was ‘a path forward’?

Remember, in Sept. 2012, Senate Republicans censored a nonpartisan CRS study which concluded that changes in marginal tax rates had no statistically significant impact on economic growth, because any supply-side benefits were negated by demand-side losses. What was found was that marginal tax rate cuts contributed to greater levels of income & wealth inequality.

Kansas is not now, nor has it ever been a low tax state, not even close.

In the short run, the elastic response to lower tax rates is very low. Totally inelastic if you are talking about tomorrow. But, in the long run, the response is huge – it is very large and very decisive.

The states that have been consistently low tax states (bottom ten) more than doubled the job creation of states that have consistently been in the top ten of taxation. That’s elastic. These states had half the jobs of the high tax states 40 years ago, now they have more jobs.

We see this at the country level too. Since Reagan started reducing tax rates in 1981, the US has added 88 billion hours of work while France has lost 3 billion hours of work – the equivalent of more than 50 million full time jobs.

And, its not just France, in 1980 the countries of the European Union had a GDP 30% greater than the US. Today, they have a Gross Domestic Product 20% lower.

Extreme frugality is the most important attribute a public policy maker can bring to the table.

But we know that the idea of lowering tax rates is inherently beggar-thy-neighbor, since it allows mobile capital to play jurisdictions against one another to the detriment of the less mobile labor force and broader population.

It’s also telling that you’re not really using any controls in your ‘model’. I could argue: “The United States federal government spending a lot of money on computing and the internet in the 1970’s and 1980’s yielded massive boons to the global economy and created a massive influx of new technology and economic growth in the 1990’s and 2000’s.” And this would be another plausible story which contradicts the entire premise of your argument.

From the 1950’s until the late 2000’s, marginal tax rates have had no statistically significant effect on economic growth, once other controls are included.

“From the 1950’s until the late 2000’s, marginal tax rates have had no statistically significant effect on economic growth…

That’s sophistry. Show me the research that correlates tax rates with revenues raised by that tax and economic activity affected by that tax. That elasticity is huge – in the long run on the order of 3.0 meaning that the revenue maximizing tax rate is less than 25%.

Which we can intuitively see in that federal government revenues never moved above above 19% even when tax rates were moved up above 90%. People just didn’t pay those tax rates and they had no effect other than to vaporize economic activity in one sphere and reorganize it into another sphere.

That’s perhaps why this blog’s author is such an enthusiast for high tax rates – he gets paid hefty sums for reorganizing that activity.

Also, your lack of correlation also lacks the controls that you criticize me for lacking. Since Reagan’s tax rate reductions in 1980, the Uniform Code of Federal Regulations has increased by 73,000 pages- an enormous economic burden. Further, since 1980, the Federal Government revenues have increased by over 500% while France has increased by less than 260%. This revenue was used to enhance welfare programs which also damaged job creation.

The only way to control for both regulation and welfare is to compare the US to Europe which also had regulation and welfare enhancement. That’s why the GDP comparison and job creation comparison with Europe is so important. It is the only accurate information we have on the impact of tax rates on job creation and economic growth.

The fact that all of these “studies” have denied this obvious truth is a sign of the deep intellectual corruption of our university, our research system and our media.

“Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the
1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced. ”

You are not being honest at all. Warren Buffett, the Google boys, Zuckerberg, Bill Gates, BezosSoros and a few other prominent democrats have earned in excess of $350 billion dollars while not paying even 1% of it in taxes.

What democrats want to do is to pretend to tax the rich while really taxing Republicans who create jobs for poor people. Poor people who then might escape the dependency that democrats need for their power base.

People saw through this in this election. Democrats got burned for this dishonesty.

Mr. Huppenthal, I think you’re wrong on a great many things, but you did implicitly bring up one really good point here. There are a ton of loopholes, special deductions, and complicated nuances to the tax code, to the tune of $80,000,000,000 per year in compliance-related costs.

I agree that it would be better if the tax code could be simplified to have fewer special giveaways to the politically well-connected. I would like to see some of the special deductions that various big businesses get go away, and yes, I would be willing to give some cuts in the topline marginal rates across the board. I don’t like the policy that the city and county seems to have, where we bring in big businesses by giving them special tax exemptions that we the people don’t have access to. I don’t think that’s a good path to economic stability.

But don’t make this a partisan issue. The Koch Bros. and other GOP financiers are making off with plenty of tax breaks just the same as the people you listed. Claiming it’s only one side while the other is completely innocent would be an exercise in intellectual dishonesty.

The entire technique that Buffet uses to keep all of his earnings tax free is not available to the Koch brothers. Koch industries is privately held company so all their earnings are pass through at personal income tax rates. Buffet pays no dividends so all of his earnings accumulate as tax free capital gains.

He literally pays no taxes at all despite having made $61 billion.

As long as his companies bundle to the democrat party, he is allowed to laugh and smirk all the way to the bank.

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